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How South32 Ltd has thumped the returns of BHP Billion Limited

Credit: Grange Resources presentation

If you look back over the last couple of years, emerging diversified metals and mining company South32 Ltd (ASX: S32) has taken the bubble and squeak of former father BHP Billion Limited (ASX: BHP) and made soufflé out of it. 

South32 kicked off independent trading on the ASX in mid-2015 after a demerger from commodities giant BHP, which saw an in-specie distribution of South32 shares to BHP shareholders. 

Rumour had it South32’s portfolio was cast off from BHP as it wasn’t widely supported, with assets in alumina, aluminium, coal, manganese, nickel and zinc to name a few. 

At the time BHP said shedding South32 would unlock shareholder value by simplifying its core operations with focus on the larger portfolios. 

But South32 has made the best of the offcuts, with its share price rising an impressive 80% since its closing price of $2.05 on its first day of trade in May 18 2015. 

South32 opened on February 8 down slightly to $3.70, but is still 24% above its 200-day moving average. 

As a comparison, BHP closed at $30.13 on May 18, 2015, opening today down 1.4% at $29.43. 

There are other factors to consider in this comparison, but there is little doubt that South32 has flourished in its short time trading and looks set to continue to do so on its current route. 

In company news South32 has recently named its main priorities as base metals, with a plan to spin off its South African Energy Coal assets within the next 6 months. 

The South32 quarterly report issued in mid-January indicated FY18 guidance had been maintained for all operations, with an 8% increase in manganese thanks to strong market demand. 

The company paid out $333 million in shareholder dividends during the December 2017 half year and bought back 37 million shares for a cash consideration of US$93 million. 

Analysts like most things about South32 at the moment, with commodity prices high in the resources sector as a whole. 

But analyst forecasts are for South32’s share price to continue its upwards ascent for the time being, with a projected share valuation of $4.04 and half-year results handed down on February 15 expected to be reasonably positive. 

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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